Woodward(US:WWD)2021-08-03 02:47Financial Data and Key Metrics Changes - Net sales for Q3 2021 were $557 million, an increase from $524 million in the prior year quarter, representing a growth of 6.3% [9][23] - Net earnings and adjusted net earnings for Q3 2021 were both $49 million or $0.74 per share, compared to $38 million or $0.61 per share in Q3 2020 [9][10] - Net cash provided by operating activities for the first nine months of 2021 was $318 million, up from $212 million in the same period of the prior year [10][31] - Free cash flow for the first nine months of 2021 was $297 million, compared to $173 million in the prior year [32] Business Line Data and Key Metrics Changes - Aerospace segment sales for Q3 2021 were $341 million, an increase of 11% from the prior year quarter, with commercial OEM and aftermarket sales up 51% and 11% respectively [24] - Industrial segment sales for Q3 2021 were $216 million, slightly down from $217 million in the prior year period, but excluding renewable power systems, sales increased to $210 million [28] - Aerospace segment earnings for Q3 2021 were $53 million or 15.6% of segment sales, compared to $41 million or 13.4% in Q3 2020 [27] Market Data and Key Metrics Changes - U.S. domestic travel is returning to near pre-COVID levels, while international travel remains weak [13] - Demand for gas turbines in power generation is increasing, with expectations for further improvement in 2022, driven by growth in Asia [15] - The global marine market is seeing improved ship utilization, which is expected to drive aftermarket activity [17] Company Strategy and Development Direction - The company anticipates recovery to pre-pandemic levels in 2023, with significant growth expected from market share gains and favorable fleet dynamics [12] - Continued investment in innovative products aimed at enhancing emissions performance, reliability, and fuel efficiency is a priority [19][20] - The company plans to focus on bolt-on acquisitions to fill in its strategic gaps, leveraging a strong balance sheet and cash flow [48] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing global supply chain disruptions and the unpredictable impact of COVID variants as factors contributing to future uncertainty [12][18] - The company remains optimistic about the recovery of its markets, particularly in aerospace and industrial segments, despite anticipated volatility [18][33] - Management expects sales, earnings, and free cash flow results for Q4 2021 to be higher than Q3, but considerable uncertainty remains [33] Other Important Information - The company experienced a $30 million negative impact on sales due to global supply chain constraints, predominantly affecting the aerospace business [23] - R&D expenses for Q3 2021 were $30 million, or 5.3% of sales, down from $35 million or 6.6% in the prior year [30] Q&A Session Summary Question: Competitive implications of Parker-Hannifin's acquisition of Meggitt - Management does not foresee significant changes in the competitive landscape due to this acquisition, noting only minor overlaps in certain areas [38][41] Question: Details on supply chain issues and their impact - The $30 million impact was predominantly from aerospace, with shortages primarily in electronics and other disruptions due to COVID-related plant shutdowns [55][56] Question: Outlook on guided weapons demand - Management anticipates a significant decline in guided weapons in fiscal 2022, with current demand being flat to slightly down [59][60] Question: Recovery in marine aftermarket and industrial markets - Management is optimistic about improvements in marine aftermarket and industrial markets, with expectations for better performance in 2022 [68][70] Question: Hiring and structural cost savings - The company has begun hiring back direct labor and anticipates continuing to ramp up as demand increases, with an estimated $50 million in ongoing structural cost savings [86][88] Question: Cash balance and shareholder returns - The company maintains a significant cash balance and plans to return 50% of net earnings to shareholders, including potential share buybacks [90][91]